Despite being the first of the major central banks to tighten policy, the rate hikes by the BOE have felt rather underwhelming as inflation continues to run rampant across the UK economy. To be fair, it is not like we, or policymakers for that matter, expected monetary policy to put the brakes on surging price pressures. Remember this quote from Bailey almost a year ago?

"Monetary policy cannot solve supply side shocks. Monetary policy cannot produce computer chips, it cannot produce wind, it cannot produce truck drivers."

And that is precisely the problem. At this point, it feels very much like the rate hikes are acting more to temper demand conditions so that it can help alleviate the pressure on the supply side to deliver. It's a bad look for central banks as consumers are getting crushed by the weight of high prices and economic uncertainty.

Policymakers are trying to balance all of this out by bringing the economy to a 'soft landing'. But such a picture is getting murkier day by day as economic conditions are deteriorating sharply and sociopolitics are also turning rather ugly in some countries. Boris Johnson was not spared this whole ordeal, though 'Partygate' probably didn't help his reputation either.

Going back to the BOE, they are now caught in a crossroads in trying to further tame inflation - which is still pushing towards double-digits in the UK - and trying not to run the economy into the ground.

The cost-of-living crisis is worsening and that is a major downside factor to consider for the BOE in terms of policy decision moving forward. Today will still see the BOE raise the bank rate further, expected to be by 50 bps to 1.75%, but the window to tighten has certainly narrowed considerably.

What does that mean for the pound then?

Well, it just means that we're moving closer towards a less hawkish (more dovish) stance by the BOE eventually and if anything else, it could be a more clear cut pivot than what we saw with the Fed and RBA in the past week. That sets the stage for sterling to be disappointed if in search for any upside to follow from the monetary policy side of things.

The risks are clearly skewed to the downside and that does not bode well for the pound outlook, especially if more recessionary signs continue to light up in the weeks/months ahead.

Cable is holding around 1.2170 at the moment, keeping a modest bounce since falling towards 1.1800 last month. However, I'd attribute that more to the dollar's own failings than any buoyant sentiment in sterling. The drop back below 1.2200 this week is a bit of a blow to the rebound and we could be looking towards 1.2000 again post-BOE, barring any major dollar selling from the US jobs report tomorrow.